The World Bank yesterday hailed China’s “major progress” in improving its business climate, but called for more efforts to improve creditors’ rights and creditor information systems.

Michael Klein, World Bank/International Finance Corporation vice president for private sector development and IFC chief economist, applauded the nation’s development over the past 20 years, adding that he was confident that China will continue to catch up quickly with the rest of the world in the coming decade. Klein yesterday released a Chinese version of Doing Business in 2004: Understanding Regulation, a new yearly report that provides comparative data on the business climate in 133 countries worldwide.

The Chinese version was accompanied by a country report highlighting China’s performance on five key indicators: market entry, employment, contract enforcement, creditor rights and creditor information and bankruptcy.

The report indicates that China performs well on business start-up costs, at 14 percent of per capita income, well below the East Asia regional average of 56.8 percent and close to the 10.2 percent average among members of the Organization for Economic Cooperation and Development (OECD).

 

It takes an average of 46 days to start a business in China, the report says, compared with the East Asia regional average of 66 days.

 

But the report offers less pleasant reading when it comes to China’s performance on creditors’ rights and creditor information systems.

 

“Credit information sharing is important because it opens up credit markets by expanding access to first-time borrowers and repeat borrowers with good credit histories,” said the World Bank.

 

Although the government is working to build a credit information system, the current lack has made it difficult for China’s small and medium-sized enterprises to obtain necessary funding, Klein noted.

 

The absence of such a system did not impede China’s economic growth, but “if China wants to promote local companies and entrepreneurs, moving in that direction is a major challenge,” he said.

 

Doing Business collects and analyzes data on 133 countries, including OECD countries. The analysis is based on assessments of each country’s laws and regulations, with input from and verification by local experts who assist entrepreneurs in starting a business, hiring and firing workers, getting credit, and closing a business.

 

The report enables countries to benchmark themselves against neighbors, major competitors and any country that has developed best practices on the various indicators.

 

“Doing Business is a tool for policy makers and the public to give them quantitative ways to measure business regulations to see how well they allow entrepreneurs to start, operate and grow businesses,” said Klein.

 

Among other findings, the report concludes that regulation in poorer countries is more cumbersome for all aspects of business activity.

 

Heavier regulation is generally associated with greater inefficiency in public institutions--longer delays and higher costs--and results in higher unemployment, increased corruption and lower productivity and investment, but not in the improved quality of private or public goods, it says.

 

(China Daily April 9, 2004)